Government launches Vision 2025 plan

King Abdullah II and the prime minister, Abdullah Ensour, have presented a new blueprint for economic and social development that they hope will transform the country's fortunes by 2025, including tackling persistent issues of poverty, unemployment and fiscal deficits. Since he came to the throne in 1999, the king has consistently tried to emulate similar comprehensive long-term plans favoured by the Gulf Co-operation Council states. Unfortunately for Jordan it has never had the resources available to its wealthy neighbours to help make the plans a reality, and it has had mixed success in taking advantage of free-trade agreements that should have opened economic opportunities. Now the newest plan also has to contend with a continually worsening regional political and security situation.

Mr Ensour was obviously aware of the challenges, and during the address launching the document he acknowledged that drawing up a vision for any Middle East country at the present time was a gamble. According to the prime minister, the plan takes regional uncertainty into account and can be reviewed and adjusted according to circumstances. The planning and international co-operation minister, Imad Fakhoury, has said that the government is aiming to have the final draft ready by August.

The plan tries to account for challenging regional situation

The government hopes that by allowing for two scenarios within the Vision 2025 plan, it will be able to cope with regional uncertainty. The more conservative scenario in the plan, is, however, still fairly optimistic; it assumes that the economy will grow by 4.8% annually over the next ten years, which would still be a solid improvement on the 3.1% registered in 2014, although below the ten-year average to 2014. The more ambitious scenario suggests that annual economic growth could be as high as 7.5% by 2025. The plan proposes 400 policies and measures to be implemented by the government, private sector and civil society that the report's instigators hope will encourage stronger economic performance and an improvement in Jordan's business environment and judicial independence.

The vision sets some ambitious targets. Beyond the high GDP growth rates, Vision 2025 calls for a substantial decline in the unemployment rate from the current 13% to between 8% and 9.2% by 2025. The wide range allowed for the unemployment target could be a recognition that the presence of a large number of Syrian refugees in the country is likely to have an uncertain impact on labour market developments. A decline in unemployment, and higher female labour participation, which at 15% is one of the lowest in the world and is targeted to rise to 24%, could help in meeting the goal of reducing Jordan's extreme poverty rate from 14% to 8% over the period.

Vision 2025 also sets fiscal goals

The government's plan also targets a decline in public debt to 47% GDP by 2025, down from the current level of close to 81%, and aims for local revenue to cover 130% of current spending, up from 86.4% in 2014. The plan also envisages the budget deficit including grants moving from deficit into balance by 2025. The government is aiming to see a shift in the economy that will boost the contribution of agriculture to GDP from the current 2.9% to 3.4%—although water scarcity will make this challenging—and industry from 22% to 27%, while the contribution of services should decline from 68% to 61%. The plan is to be carried out through three executive programmes, and the government is already preparing for the 2016‑18 element.

The government envisages improvements to the tax system and business regulation and greater public-sector efficiency in a bid to boost private-sector performance. The plan projects both the sell off of state-owned companies and government working more closely with the private sector in other areas. Vision 2025 sets out plans to reform the tax administration, provide new tax incentives to businesses to encourage investment and introduce legislation to encourage Jordanians to establish start-up businesses.

Limits to trade capabilities and regional situation will limit prospects

The plan is strong on good intentions, including enabling Jordan to establish itself as a regional economic "gateway" by taking advantage of a number of free-trade agreements to develop an export-oriented economy. They are, however, intentions that have existed for some time. A free-trade arrangement with the US began with the Qualifying Industrial Zones agreement in 1996 and continued with a full free-trade agreement that was fully implemented in 2009. Trade with the EU has been progressively liberalised, starting with the signing of an EU Association Agreement in 1997 and culminating in a December 2011 EU decision to push ahead with Deep and Comprehensive Free-Trade Agreements (DCFTAs) with Jordan, Egypt, Tunisia and Morocco designed to improve market access and support economic reforms. The agreement with the US had been relatively successful, with exports of ready-made clothing to the US valued at around US$1bn annually. However, activity has never fully developed beyond that sector, while the EU markets currently take less than 5% of total Jordanian exports.

Ambitions to develop as a regional economic hub will also be hampered by the security situation in Iraq, which is damaging one of Jordan's key export markets, and Syria. Despite these issues, a comprehensive ten-year plan does at least offer Jordan the chance to introduce much-needed improvements in its business and legal framework that could go some way in the longer term to boosting potential economic performance. Focused economic planning should also help to counteract some of the damage flowing from the regional situation and reduce the current emphasis on foreign aid as a solution.